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No 9 December 2003 Ethics in BusinessMore than three thousand years after Moses descended from Mt. Sinai with the Ten Commandments, acceptable behaviour in our modern culture is still rooted in "Thou shall not lie," "Thou shall not steal," and so on. We learned how to behave from our parents and relatives since birth, and in our religious grounding as children: Tell the truth, play fair, don't hit, etc. When we went off to school, our teachers introduced us to a thought that was a kind of amalgamated approach to all the commandment stuff we had learned so far: Treat others as you would want them to treat you. The Golden Rule is a handy little nugget with a catchy name, and it has created a positive, ethical foundation for millions of children just learning how to behave in society. Teaching children how to behave is relatively easy. In the world of the little guys, most things are either black or white: Did you tell the truth, or not? Does this belong to you, or not? Then We Grew Up In the adult world, things are more complicated. And somewhere along the way, to help us out, someone identified the concept of ethics. Webster defines ethics as: "Ethics - a system or code of moral standards of a particular person, group, or profession." The operative word in this definition is "system," which Webster says can be, "a set of facts, principles, rules, etc., arranged in an orderly form." Notice that in the definition of ethics, Webster does not mention right or wrong, honest or dishonest. Strictly speaking, everyone has ethics of some kind. The word "ethical", however, has come to mean, and is defined as, acceptable, honest, and trustworthy behaviour. Sometimes it's used almost as a euphemism, as when we hear someone inquire if another person is ethical, which is a rather oblique way of asking, "Can he be trusted?" Black, White, and Grey Right and wrong are black and white - absolute - pure - uncomplicated. Not the least bit like a system. We develop our ethical behavioural system similar to the way an alloy is created: Blend a double handful of the issue at hand, a scoop of the circumstances we are faced with, a lump of the environment we find ourselves in, together with a full truckload of our personal behavioural standards. Then we take this mixture and, with time and pressure, forge it into a system that withstands the stress and strain of our social and business lives. But here's why ethical behaviour can be complicated: You are free to define handful, scoop, lump, and truckload as you wish. And in that definition lies your personal ethics, in the grey area. In your life you will acquire a reputation for some level of ethical behaviour. That reputation will be based on your conduct as you operate inside the grey area, between black and white. Ego and Language As we grow into adulthood, two things happen that shape our ethical behaviour:
Without ego, language or justification, all issues would be black or white - right or wrong. But ego + language + justification = lots of grey area. I'm sure you are familiar with this now infamous, but no less classic, example of the use of language by then-president Bill Clinton, when in a test of his ethical behaviour, he actually answered a question with: "That depends on what your definition of 'is' is." Business Ethics In business, ethical behaviour becomes even more complicated for two primary reasons:
There is a Latin term in business law, caveat emptor. English translation: Let the buyer beware. In other words, in business, with the exception of investment securities, where full disclosure is the statutory coin of the realm, it is the buyer's responsibility to find the deal points that are negative to him. It is not the seller's responsibility to presume what would be a negative for the buyer. So, if the buyer can't determine all of the negatives through his own due diligence efforts, while it may not be your legal obligation to help him out, when does it become your ethical obligation? Do you answer the question as it was asked, which might leave something out? Or do you provide a broader answer, which addresses the spirit of the question? Enter ethics - specifically, your personal ethical system - the grey area. Sometimes business rookies think that since negotiations can be adversarial, anything is fair as long as you get away with it. Such an unfortunate attitude does not promote ethical behaviour. Everyone wants to get the best deal they can for themselves, but being deceptive, evasive, and/or untruthful is not the ethical way to achieve your goals. There will always be an abiding tension between negotiating for an advantage and your personal ethical standards. As you road test your own ethical system in the marketplace, you will know if you have developed a successful one by the way people deal with you. Remember, it is possible to improve your ethical system and grow as an ethical businessperson. Let's establish that, unethical behaviour in business today is not exactly ploughing new ground; but we are using newer implements. The marketplace was born when Gog, the Neanderthal, traded some shells to Ooma, the Alsatian, for a hide. And ever since Ooma failed to mention a quality defect in his next hide deal with Gog, the concept of ethics has been an abiding element in business. Lots Of New Owners In the small business sector we have our own challenges. The American Small Business Association says over 800,000 new entrepreneurs enter the marketplace every year in America. More than at any other time in history people are entering the marketplace on their own behalf at all stages of life: young, middle aged, over 60. Fertile entrepreneurial soil is creating unprecedented opportunity for so many. But it has also created interesting ethical dynamics. It's not that these new entrepreneurs don't know how to behave. But if they are brand new to the marketplace, or have been insulated from ethical pressures inside of a large organisation, their ethical taproot, with regard to weathering marketplace pressures on their own behalf, may still be relatively shallow and untested. Now as new business owners they must operate ethically on their own - perhaps for the first time in their career - in the grey area. Many of us fine-tuned our professional ethics at the knee of an employer mentor. More and more young people are beginning their professional lives as business owners instead of as employees, which tends to limit opportunities to work with a positive ethical mentor. For those of us who are a little longer-in-the-tooth in the entrepreneurial marketplace, it now is our responsibility to become mentors to this new generation of owners. Here are two of many ethical lessons I have learned in my 30+ years in the marketplace. Industry Ethics Let's revisit Webster's definition of ethics: "A system or code of moral standards of a particular person, group, or profession." Notice how Webster infers that ethics may vary between different groups or professions. In the marketplace you will find that there are, in fact, ethical protocols that may vary somewhat from industry to industry; subtle ways of dealing and negotiating. This doesn't mean that there are different interpretations of the truth, just different ways of operating within the grey area. If you're not yet a veteran of your industry, find people you can trust who are veterans, and observe them. You may find that your own personal ethical system needs to be elevated to be acceptable in a new environment. However, if you find that your standards are higher than those around you, always default to your standards. Good Faith Let's say you and I are negotiating a business transaction that has several deal points. When the formal agreement is prepared, a mutually accepted key point for your side is unintentionally omitted, but the omission is not noticed until after both of us have signed the agreement, which is now legally binding. Even though we both had a chance to read the agreement before signing, and I now have no legal obligation to allow the document to be amended, if I am dealing in good faith, I will make sure that our contract is as we agreed during the negotiations, and allow the omitted point to be added. An example of not dealing in good faith is when your conduct or words have led someone to believe you will behave or perform in a certain way, and then at the last minute, when you may have achieved some negotiating leverage, you do something different that lessens the value of the deal for the other party. It has been my experience that most people will behave ethically. But unfortunately, there are those who will not. When you do business with someone who does not deal in good faith, you can never assume that the verbal agreements you have made in the pre-contract stage of a negotiation will be honoured, especially if the other party has, or thinks they have gained negotiating leverage. These people are moving targets and I avoid them whenever possible. It's okay to be a tough negotiator. You should do your homework and conduct thorough due diligence. Absolutely, fight for the best deal you can get. None of this precludes you from behaving consistently, and dealing in good faith. The best and simplest way to conduct business successfully AND ethically is by dealing in good faith. You will find that dealing in good faith will allow you to be a tough negotiator AND work toward a deal where everyone wins.
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